Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Discussion of the Gold portion of the Permanent Portfolio

Moderator: Global Moderator

dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by dragoncar » Wed Jan 13, 2016 12:54 pm

Libertarian666 wrote:
dragoncar wrote:
pugchief wrote: Why is SGOL better than IAU, which has a much lower expense ratio [besides being able to trade it free at Schwab]?
I don't know, although there seems to be a bandwagon.  From what I can tell, SGOL is Swiss and maybe holds less paper?  IAU may be less tax efficient.

I mean, what's so bad about PHYS even besides the tax churn of redemptions?
Being taxed at the collectibles rate?
Which options do we have that are not taxed at the collectibles rate?
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Libertarian666 » Wed Jan 13, 2016 3:53 pm

dragoncar wrote:
Libertarian666 wrote:
dragoncar wrote: I don't know, although there seems to be a bandwagon.  From what I can tell, SGOL is Swiss and maybe holds less paper?  IAU may be less tax efficient.

I mean, what's so bad about PHYS even besides the tax churn of redemptions?
Being taxed at the collectibles rate?
Which options do we have that are not taxed at the collectibles rate?
GTU :-(

And CEF, but that has a lot of silver too.
User avatar
AdamA
Executive Member
Executive Member
Posts: 2334
Joined: Sun Jan 23, 2011 8:49 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by AdamA » Thu Jan 14, 2016 7:22 am

Libertarian666 wrote: And CEF, but that has a lot of silver too.
Actually not a bad idea, though, especially if you don't hold a high percentage of your overall gold allocation in an ETF or close-ended fund. 

I just like these Canadian funds better.  They are more transparent and less susceptible to Wall Street shenanigans, IMO. 
"All men's miseries derive from not being able to sit in a quiet room alone."

Pascal
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Libertarian666 » Thu Jan 14, 2016 10:30 am

AdamA wrote:
Libertarian666 wrote: And CEF, but that has a lot of silver too.
Actually not a bad idea, though, especially if you don't hold a high percentage of your overall gold allocation in an ETF or close-ended fund. 

I just like these Canadian funds better.  They are more transparent and less susceptible to Wall Street shenanigans, IMO.
Yes, I have some CEF, but then I'm a well-known heretic with respect to the PP.  ;D
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Libertarian666 » Sun Jan 17, 2016 10:12 am

So does anyone know what happens to people who hold GTU in a brokerage account? Even though I see that Sprott has taken it over and has exchanged units of Sprott Physical Gold Trust for GTU, my Fidelity account still shows GTU.

I guess I need to call Kingsdale Shareholder Services to find out what is going to happen.
LazyInvestor
Executive Member
Executive Member
Posts: 190
Joined: Thu Aug 02, 2012 5:37 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by LazyInvestor » Sun Jan 17, 2016 10:31 am

I found this

As a result of the completion of the Merger Transaction: (i) GoldTrust unitholders received an aggregate of 4.4108 units of Sprott Physical Gold Trust in exchange for each unit of GoldTrust;

https://finance.yahoo.com/news/central- ... 00760.html

What does this come to? Are we being ripped off somehow?
LazyInvestor
Executive Member
Executive Member
Posts: 190
Joined: Thu Aug 02, 2012 5:37 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by LazyInvestor » Sun Jan 17, 2016 10:38 am

with google finance end of day values GTU 39.42 / PHYS 8.94 = 4.4094

4.4108 * 8.94 PHYS = 39.4325 GTU

and

Net asset value per Unit $39.76

from http://gold-trust.com/asset_value.htm

so it seems they are converting to PHYS at a discount, which means we are kinda at a loss?!
Reub
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Reub » Sun Jan 17, 2016 11:04 am

I'm sticking with PHYS because at my age it helps after I've eaten too much.
LazyInvestor
Executive Member
Executive Member
Posts: 190
Joined: Thu Aug 02, 2012 5:37 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by LazyInvestor » Sun Jan 17, 2016 11:09 am

This is how they calculated exchange ratio:

NAV to NAV Exchange Ratio

In connection with the Sprott offer for GTU, the NAV to NAV Exchange Ratio (as defined in the Sprott offer) is 4.3997 PHYS units per GTU unit. In addition, if the Sprott offer is completed each GTU unitholder will receive the Bonus Consideration (as defined in the Sprott offer) of an additional 0.0111 PHYS units per GTU unit. In total, if the Sprott offer is completed, GTU unitholders will receive a total of 4.4108 PHYS units per GTU unit.

For the purposes of the NAV to NAV Exchange Ratio, the number of PHYS units to be distributed to each GTU unitholder was determined based on: (A) the net asset value per GTU unit (as calculated, in accordance with GTU’s amended and restated declaration of trust, on the second business day prior to the expiry date of the Sprott offer (the “Expiry Date”); divided by (B) the net asset value per PHYS unit (as calculated, in accordance with PHYS’ trust agreement, on the second business day prior to the Expiry Date), including, in the case of GTU’s and PHYS’ gold bullion, the value thereof based on the London Bullion Market Association second fixing price for gold bullion on the second business day prior to the Expiry Date.

For the purposes of the Bonus Consideration, the number of PHYS units to be distributed to each GTU unitholder was determined based on: (A) U.S.$0.10; divided by (B) the net asset value per PHYS unit (as calculated, in accordance with PHYS’ trust agreement, on the second business day prior to the Expiry Date), including, in the case of GTU’s and PHYS’ gold bullion, the value thereof based on the London Bullion Market Association second fixing price for gold bullion on the second business day prior to the Expiry Date.

Source: https://globenewswire.com/news-release/ ... Trust.html
rickb
Executive Member
Executive Member
Posts: 762
Joined: Mon Apr 26, 2010 12:12 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by rickb » Sun Jan 17, 2016 11:38 am

As of the close on Friday the NAV of PHYS was $9.00 and the NAV of GTU was $39.76, which is a ratio of 4.41777.

Apparently Sprott's calculation ended up with a ratio of 4.3997.

Since the $.10 bonus shares work out to .0111 they're apparently using $9.00 per share as the NAV of PHYS, which matches what they've posted at http://sprottphysicalbullion.com/sprott ... set-value/

Working backwards, they must be using a NAV for GTU of $39.5973, which is $.16 per share short of what GTU posted Friday at http://www.gold-trust.com/asset_value.htm

By my calculations, instead of a bonus of $.10 per share the actual net effect is a penalty of $.06 per share.  Times nearly 20M shares adds up to a little more than $1M.
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Libertarian666 » Sun Jan 17, 2016 1:24 pm

rickb wrote: As of the close on Friday the NAV of PHYS was $9.00 and the NAV of GTU was $39.76, which is a ratio of 4.41777.

Apparently Sprott's calculation ended up with a ratio of 4.3997.

Since the $.10 bonus shares work out to .0111 they're apparently using $9.00 per share as the NAV of PHYS, which matches what they've posted at http://sprottphysicalbullion.com/sprott ... set-value/

Working backwards, they must be using a NAV for GTU of $39.5973, which is $.16 per share short of what GTU posted Friday at http://www.gold-trust.com/asset_value.htm

By my calculations, instead of a bonus of $.10 per share the actual net effect is a penalty of $.06 per share.  Times nearly 20M shares adds up to a little more than $1M.
So the big "bonus" is just as phony as the rest of their offering terms.

What a bunch of scumbags.

Needless to say, I'm going to sell my PHYS as soon as I get it, or sell the GTU if I can still do that at Fidelity.
User avatar
dualstow
Executive Member
Executive Member
Posts: 11574
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by dualstow » Sun Jan 17, 2016 5:11 pm

Reub wrote: I'm sticking with PHYS because at my age it helps after I've eaten too much.
PLOP & PHYS?
https://www.city-journal.org/journalism-advocacy-over-reporting
LazyInvestor
Executive Member
Executive Member
Posts: 190
Joined: Thu Aug 02, 2012 5:37 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by LazyInvestor » Mon Jan 18, 2016 8:13 am

It seems we won't have time to trade as the day of conversion is Jan 19. Today is some holiday so markets are closed.
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Libertarian666 » Tue Jan 19, 2016 10:29 am

I was able to sell my converted shares but I had to call Fidelity to do it.
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by dragoncar » Tue Jan 19, 2016 12:03 pm

I'm waiting until my annual contribution/rebalancing time next month.  Is there an urgent need to get out of phys?  Seems my taxes next April are screwed either way!
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Libertarian666 » Tue Jan 19, 2016 12:14 pm

dragoncar wrote: I'm waiting until my annual contribution/rebalancing time next month.  Is there an urgent need to get out of phys?  Seems my taxes next April are screwed either way!
The need is that I hate Sprott's behavior in this situation and don't want to do business with them in any way, ever.
al14
Junior Member
Junior Member
Posts: 4
Joined: Mon Jan 18, 2016 2:29 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by al14 » Tue Jan 19, 2016 12:42 pm

Hello!
I was a GTU holder until PHYS took over a few days ago. Given that I always elect QEF option on my US tax form I do not find PHYS any different from GTU since the annual PFIC statements show no distributions since the inception in 2010. I'm a little confused by this, since the redemptions should cause adverse 28% collectible tax rate on US unit holders in Sprott PHYS, but there is no evidence as far as annual PFIC statements show. Is there another tax document that exposes US unit holders to 28% collectible tax rate, or is there something I don't understand?
Reub
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Reub » Tue Jan 19, 2016 3:09 pm

I guess that this is my first day owning PHYS and I noticed that it closed down 0.34% vs. down 0.10% for GLD and IAU. Why is this?
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by dragoncar » Tue Jan 19, 2016 3:23 pm

al14 wrote: Hello!
I was a GTU holder until PHYS took over a few days ago. Given that I always elect QEF option on my US tax form I do not find PHYS any different from GTU since the annual PFIC statements show no distributions since the inception in 2010. I'm a little confused by this, since the redemptions should cause adverse 28% collectible tax rate on US unit holders in Sprott PHYS, but there is no evidence as far as annual PFIC statements show. Is there another tax document that exposes US unit holders to 28% collectible tax rate, or is there something I don't understand?
Good question, and I'd like to know also.  I tried to find out what makes a gold holding collectible and it seems like closed-end funds are not whereas ETFs are?  I did search in the gold sub-forums but I couldn't find a recent summary of non-physical gold options.
LazyInvestor
Executive Member
Executive Member
Posts: 190
Joined: Thu Aug 02, 2012 5:37 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by LazyInvestor » Wed Jan 20, 2016 8:51 am

Good you managed to sell. I still only see GTU at IB. I guess it'll take few days for them to convert the shares.
Reub
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Reub » Wed Jan 20, 2016 10:24 am

With the price of gold moving higher recently I hope that PHYS doesn't find a way to screw us on the conversion by not including us in these recent gains.
Dmilligan
Junior Member
Junior Member
Posts: 13
Joined: Wed Dec 19, 2012 7:49 am

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by Dmilligan » Wed Jan 20, 2016 10:38 am

Anyone have any guess as to how long this conversion will take? What's the soonest I will be free to sell out of PHYS?
User avatar
pugchief
Executive Member
Executive Member
Posts: 4322
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by pugchief » Wed Jan 20, 2016 12:28 pm

Dmilligan wrote: Anyone have any guess as to how long this conversion will take? What's the soonest I will be free to sell out of PHYS?
I was holding some GTU at TDAmeritrade, and it was already showing as PHYS yesterday morning.
"Congressmen should wear uniforms, you know, like NASCAR drivers, so we could identify their corporate sponsors."
al14
Junior Member
Junior Member
Posts: 4
Joined: Mon Jan 18, 2016 2:29 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by al14 » Wed Jan 20, 2016 12:34 pm

..and why would anyone want to sell their PHYS given that there is no difference whatsoever between it and GTU for tax or other purposes (besides redemption option, that is useless for most and doesn't affect US taxes)
steve
Executive Member
Executive Member
Posts: 260
Joined: Mon Jul 26, 2010 2:06 pm

Re: Sprott Intends to Make Exchange Offers for Central GoldTrust and Silver Bullion

Post by steve » Wed Jan 20, 2016 1:37 pm

al14 wrote: ..and why would anyone want to sell their PHYS given that there is no difference whatsoever between it and GTU for tax or other purposes (besides redemption option, that is useless for most and doesn't affect US taxes)
I sold just because I do not want to have anything to do with Sprott because of  the takeover and the way it was done.  I made it work in my best interest taking advantage of a tax loss harvest.  I added to my core physical bullion and bought IAU and then also sold that for a tax loss harvest and now have GLD  As far as I know there is no wash sale rule for collectibles so that is also an advantage. 
Post Reply